Why has the world not warmed up to Make in India?
Weak infrastructure, lack of products of international standards are among a host of issues that bog down India’s manufacturing sector
The government launched its ‘Make in India’ initiative in September 2014 as part of India’s renewed focus on manufacturing. The singular objective behind this was to promote India as the preferred destination for global manufacturing, and a slew of reforms were taken to boost manufacturing, design, innovation, and startups in India. The ‘Atmanirbhar Bharat” campaign announced last year was intended to further boost local manufacturing under its stated goal of making India economically self-sufficient.
How far has Indian manufacturing progressed under these initiatives? Many types of evaluation criteria – including incremental changes in India’s exports – have been applied to gauge the impact of these initiatives. In my opinion, perhaps the most appropriate appraisal criteria is to answer the question: how seriously does rest of the world consider India as a global sourcing market?
A scattered success story
There are certainly a handful of domains where India has carved a position of manufacturing leadership over the years. Apparel and accessories, textiles, drugs and pharmaceuticals, petroleum products and motor vehicles are on top of this list. However, we still have a long way to go before our manufacturing can match the success of our services exports, and one of the biggest issues is around certification.
Corporations around the world increasingly prefer to source goods from factories that are ISO or BSI certified. In China, across most product categories, a huge majority of factories are ISO or BSI certified, but finding similar operations in India can prove to be an uphill task. We faced this challenge firsthand while looking for mask manufacturers last year. In India, CE and FDA certified manufacturers can perhaps be counted on one hand. Majority of them do not even meet any basic inspection standards. In comparison, China had hundreds of mask factories with CE and FDA certification.
In most cases, practical issues like these are enough to discourage serious international buyers from considering India as a sourcing destination. Still, this is a problem that can and must be addressed at the manufacturers’ end. On the other hand, there is no end to the systemic issues plaguing Indian manufacturing.
While we explore some of the critical issues below, we also find it saddening that our country is missing out on yet another global opportunity offered by the pandemic, as global corporations seek alternate manufacturing or sourcing bases to hedge their dependence on China. Why cannot India be their preferred choice?
The Tiger and the Dragon
While India and China have historically been seen as prominent manufacturing bases in Asia, both countries have very different manufacturing capabilities today. They also have a hugely contrasting socio-economic and political environment.
At about $3 trillion, China’s manufacturing sector is ten times bigger than India. It is also currently in the midst of a 10-year transformational campaign, named ‘Made in China 2025’, which aims to move the country beyond labour-intensive manufacturing and into cutting-edge sectors like robotics and aerospace.
India in contrast is still aiming to bring old-school, labour-intensive manufacturing to an economy that desperately needs to create millions of new jobs. Even this low-end goal has been hit by a faltering economy over the last two years.
Can India sell ‘Make in India’
India’s weak infrastructure continues to be a fatal flaw for the manufacturing sector. Our country uses only 3% of its GDP for infrastructure construction each year, as compared to China’s 20% of its GDP. Even today, India’s surface transportation systems simply cannot meet the expectations of modern high-speed logistics – the backbone of efficient manufacturing.
This point becomes clearer with the following illustrations. In China, it takes us just one hour by train to reach factories in Hangzhou, 200 km from Shanghai, with trains departing every 30 minutes from Shanghai. This journey used to take three hours until 2003. In comparison, the Mumbai-Pune journey with the same distance still takes 3.5 hours in the fastest train available.
Poor and erratic electricity supply is yet another drawback that puts the country’s manufacturers at a distinct disadvantage. India’s annual power gap is more than 10% and it has among the lowest per capita power consumption around the world. To summarise, if infrastructure development has been at the centre of China’s manufacturing growth, India has completely missed this train.
What’s next for Indian manufacturers
For Make in India to bear meaningful success, we ought to demarcate ad hoc protectionist actions taken amidst a raging pandemic from holistic and thoughtful decisions, policies and practices for the post-pandemic age. As another case in point, cutting-edge manufacturing facilities of the future will require a greater number of physicists and chemical engineers – can India’s education policy incentivise enough students to take these specialisations so that we will not have talent shortages in future?
Until we start to think and act on these lines, our dream of building a Aatmanirbhar Bharat will be difficult to realise.
The author is a global trade expert and the CEO of TheBuyHive.com, a global B2B sourcing platform.